Tuesday, April 23, 2013

Hitachi High Tech (8036), “High on SPE”

Hitachi High Technologies (8036) is one of the first technology firms to report earnings each quarter along with Nidec (6594), and thus the earnings meeting was well attended today. OP missed slightly for both FY3/13 results and FY3/14 projection (versus consensus). OP for FY3/13 was Y19bn, 5% below the firm’s Y20bn forecast and 8% below consensus’ Y20.6bn. OP for FY3/14 was projected by HHT to be Y28bn, a 39% increase, but again below the consensus OP of Y29bn. Given the conservative forex assumptions and low medical forecasts, we came away with a slightly positive impression.

Forex: Impact is not huge but material at Y0.3bn per Y1 move against dollar and Y1 against euro, which totals about 1.4% of total OP for each Y1 move. Assumption is conservative for this year at Y95 for $1 and Y120 for euro versus current rates of Y98 and Y128. At current rates, OP should gain Y1.7bn from current forecast. Compared to last year, tailwind from the forex at current rates is Y4.5bn for $USD and Y2.1bn for euro for a total of Y6.6bn, which would account for 73% of the profit increase this year.

Electronic devices (SPE, etc.): The main profit increase is to come from the electronic devices division, which OP is projected to rise from Y13 to Y17bn this year. HHT forecasts a strong recovery in orders in SPE during the 2H, rising to Y62bn from Y50bn in 1H and Y51bn in the 2H of last year. Process equipment (etch) should rise 14% while CD-SEM, etc. should increase by 10% this year. By device type, NAND and logic are the growth drivers while foundry and MPU are rather flat for capex. HHT’s key silicon etch product market share was 16% in 2012, 2nd to Lam Research, according to Gartner. HHT assumes that its gate etching, measuring instruments, etc. will outgrow the 5% total SPE market growth in 2013. Investment is starting for 20nm foundry gear and 14nm MPU gear. HHT foresees capex for miniaturization for 2xnm in DRAM as well. Initial production of 3D NAND is also expected. Process technologies such as FinFET and double patterning are both contributing to demand for SPE. OLED gear shipment timing and profits, 450 mm wafer equipment forecast, and medical division profit shortfall were also questioned after the presentation.

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